Yesterday, in true Apprentice style, US President Trump fired FBI Director James Comey, in unconventional and unconstitutional fashion. The move is not only going to drive calls for an independent investigation, but is also likely to make it that much more difficult for Trump to pass policy. It remains to be seen to what degree this will affect expectations for the performance of the US economy and, thus far, the reaction in markets has been muted. Broadly, the USD continues its recent recovery, aided by Treasury yields tracking higher. The rally in the USD slowed at notable trendline resistance (BBDXY at 1228/32), but there is scope for this move to extend if 2y yields can progress through 1.35% towards range resistance at 1.40%.

Today, yet again, there is relatively little on the data calendar, although a number of central bankers will be in focus. ECB President Draghi speaks to the Dutch parliament. Following Emmanuel Macron’s victory in the French presidential election, and given the continued outperformance of European economic data relative to economists’ expectations (the European Citi Surprise Index is close to a 7-year high), speculation is likely to grow as to whether the ECB will change stance at June’s policy meeting. Draghi will be closely watched for any hints that the central bank may remove the downside rate bias in its forward guidance (a step our economists expect to occur). Elsewhere, the Fed’s Rosengren (non-voter) is scheduled to speak. He previously has indicated that he thinks the economy may already be at full employment. As such, he favours at least two further interest rate hikes this year alongside an early start to the process of reducing the size of the Fed’s balance sheet. Finally, tonight, the RBNZ is expected to leave its policy rate unchanged at 1.75%.


We continue to trade within a relatively narrow trend channel. Support comes in at 1.2865, with resistance at 1.3035. Our studies are still biased for a move back towards 1.25-1.23 within the medium-term range process, so we are looking for a breakdown through support as the first sign of confirmation for this view. Further supports below lie at 1.2710 and then 1.2625-1.2600. A move through 1.3075 would force us to review this short-term outlook.

Long term, we believe the decline that started back in 2007 at 2.1160 is close to completing with the move under 1.30. While it is unclear that 1.1491 was the major base, 1.15-1.08 is our ideal ultra-long term basing region.

Error, group does not exist! Check your syntax! (ID: 3)